In 1647, the Puritan-led Parliament of England banned Christmas celebrations, including the exchange of gifts. The ban was lifted in 1660 with the restoration of King Charles II from exile. In 1659, the Massachusetts Bay Colony passed their own law (called the “Penalty for Keeping Christmas”) banning Christmas celebrations, and fined anyone who dared celebrate 5 shillings. The law was overturned by English Governor Edmund Andros in 1681, but Christmas celebration wouldn't become popular in the state until the mid-1800s.
THIS WEEK:
- The New York Times files a copyright infringement lawsuit against OpenAI and Microsoft
- Apple is fighting to keep its watches on the selves after a court places a ban on the item
- Warner Bros. Discovery and Paramount begin initial talks to merge
⚖️ Lawsuit
NYT’s Headline Lawsuit
ChatGPT, can you generate an obvious lawsuit that everyone should have seen coming?
The New York Times filed a lawsuit against OpenAI and Microsoft in the Federal District Court of Manhattan on Wednesday morning—the first major US media company to do so. The suit claims that the two companies infringed upon the Times's copyright when it used millions of articles to train its various large-language model AI systems, including ChatGPT.
"Defendants’ unlawful use of The Times’s work to create artificial intelligence products that compete with it threatens The Times’s ability to provide that service," reads the suit. "Through Microsoft’s Bing Chat (recently rebranded as “Copilot”) and OpenAI’s ChatGPT, Defendants seek to free-ride on The Times’s massive investment in its journalism by using it to build substitutive products without permission or payment."
And that "free ride" has led to a massive financial boon for both OpenAI and Microsoft. Earlier this month, OpenAI began talks to raise a new round of funding that would value it at $100 billion—making it the second most-valuable American startup behind SpaceX, writes Bloomberg. Meanwhile, Microsoft has seen its share price jump over 54% since ChatGPT was released at the end of November 2022. Yet, for all the untold billions Sam Altman, Satya Nadella, et al. have reaped from their AI models, the New York Times does not have a specific amount its seeking for the copyright claims. Instead, they state that the suit "seeks to hold [Microsoft and OpenAI] responsible for the billions of dollars in statutory and actual damages that they owe for the unlawful copying and use of The Times’s uniquely valuable works."
OpenAI is sticking to its argument that it used the Times's articles under the legal doctrine of 'fair use'. In a 2019 document submitted to the US Patent and Trademark Office, the company wrote: "We submit that proper application of fair use factors requires a finding of fair use, especially considering the highly transformative nature of training AI systems. This conclusion is strengthened by reference to existing analogous case law holding that the reproduction of copyrighted works as one step in the process of computational data analysis is a fair use of those works."
GETTY IMAGES
OpenAI and Microsoft aren't the only companies facing such copyright infringement suits. Earlier this year, stock image behemoth Getty Images sued StabilityAI, which released its AI image generator Stable Diffusion in mid-2022. As Reuters notes, Getty claimed it licensed millions of its images to other companies to train their AI models, but StabilityAI stole the images rather than license them. The suit asked for an injunction of the company using its photos, and sought monetary damages tied to StabilityAI's profits. In October, Getty filed a second lawsuit against StabilityAI, this time in the UK. The tech firm asked the judge to throw the suit out, and called Getty's claims "hopeless".
VERDICT
Yes, the toothpaste is already out of the tube somewhat here in the sense that OpenAI is a multi-billion dollar company, ChatGPT is a widely used product, and the New York Times had millions of its articles used il/legally as training data. That being said, the entire AI revolution has happened extremely fast, and it will take companies like the Times and Getty to curb OpenAI's practices rather than individual authors and artists.
⚖️ LEGAL BATTLE
Apple’s Slap On The Wrist
What began as a lawsuit over 2 years ago, is now turning into a full-blown nightmare for Apple that has even gotten the president involved.
In 2021, medical device maker Masimo sued the world's most-valuable company for patent infringement. As Engadget reported, Masimo claimed the blood oxygen monitor in Apple's Series 6 watch infringed on five of its pulse oximeter patents. A judge with the US International Trade Court agreed—on one of the infringement claims, but not the other four.
"Today's decision should help restore fairness in the market," Masimo CEO Joe Kiani said at the time. "Apple has similarly infringed on other companies' technologies, and we believe today's ruling exposes Apple as a company that takes other companies' innovations and repackages them."
Apple argued that it was Masimo that infringed on its patents, but in October of this year, the US Federal Court of Appeals upheld the initial ruling and put a ban on sales of all Apple Watch models that include the blood oxygen monitor technology, which includes Apple's Series 9 and Ultra 2 watches. The tech giant made an immediate appeal to the US Trade Delegation, which "decided not to reverse the ban following careful consultations," says CNBC. Apple also filed an emergency request to the U.S. Court of Appeals for the Federal Circuit that stayed the ban on Wednesday morning through January 10th awaiting response from the ITC.
In a separate filing on Tuesday, Masimo said that Apple's request for an interim should be denied because "there is no emergency." As the LA Times notes, Masimo claims "Apple misleads the Court as to the status quo …Apple fails to inform the Court that it has already stopped sales of the infringing Apple Watches that are the subject of the challenged ITC orders.”
For fiscal year 2023, Apple's wearables business generated about $40 billion in sales.
LATE-NIGHT EMAIL
According to Bloomberg, this case begins with an email sent to Apple CEO Tim Cook at 1am. “I strongly believe that we can develop the new wave of technology that will make Apple the No. 1 brand in the medical, fitness and wellness market," Marcelo Lamego wrote in the email. Lamego was CTO of Cercacor Laboratories, Masimo's sister company, but within hours of the email, he was being poached by Apple. “They didn’t have to steal our people — we could have worked with them,” Masimo CEO Joe Kiani told Bloomberg. “These guys have been caught with their hands in the cookie jar, and — instead of being embarrassed and doing the right thing — they’re blaming everybody and fighting everybody.”
THE VERDICT:
Apple vs Masimo is definitely a case of David vs Goliath, yet it was only this month that Google lost an antitrust case to Epic Games. And while that was a very different type of case, Silicon Valley is waking up to the fact that it is no longer invincible. Then again, it's hard to image a $3 trillion company flinching over a threat to a fraction of its revenue.
🎥 STREAMING
A Narrowing Stream?
The streaming wars could be entering a new era as Warner Bros. Discovery and Paramount begin merger talks. The two studios are the last remaining of the original Big Five Hollywood Studios that helped define the nascent industry in the early 20th century, but are lagging rivals both in the streaming business and at the box office.
Should a deal actually happen, WBD would no doubt grow its content IP through acquisition of Paramount's library that it could then stream on its Max platform and grow its subscriber base. Meanwhile, Shari Redstone, President of Paramount's parent company National Amusements, has been open about wanting to sell her controlling stake in the company.
The reported talks also come on the heels of a months-long strike by both writers and actors that froze the industry, cost billions, saw many lose their jobs, and impacted the release date of subsequent projects. Furthermore, as CNBC notes, when the Warner Bros Discovery deal was put together in April 2022 it was executed as a Reverse Morris Trust which allows for a tax-free transfer of a subsidiary by combining it in a reorganization with an interested party. Part of the deal also stipulated that Warner Bros Discovery would then "lay low" for two years following the deal. That window ends in April.
The New York Times does give reason to question the deal, however: "Warner Bros. Discovery has $40 billion in debt and $5 billion in free cash flow, while Paramount has negative cash flow and $15 billion in debt," the Times details. "In other words, the combined company would have a crushing debt load and little money to pay that down or spend on content."
STREAMING WARS
So, could a new platform combining Max (WBD's platform) with Paramount+ compete? Well, the combined total subscribers would put the new platform at about 158 million. That number is still dwarfed by Netflix's 247 million subscribers, and only edges out Disney+'s 150 million…until you add the additional 49 million subscribers Disney also has on Hulu.
The deal would give WBD more than just subscribers. As Variety notes, the studio would acquire several of Paramount's major franchises including Top Gun, Mission Impossible, Terminator, and Transformers. Paramount's TV assets include CBS, MTV, Comedy Central, BET, and Nickelodeon.
VERDICT
It was always clear the streaming wars would shift from an endless growth and competition phase, to a mergers and consolidation phase. Maybe it required the 5-ish month pause of the WGA/SAG strikes to instigate the transition, but even if this deal doesn't go through, we're clearly entering a new era.
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